Injection Molding Machinery
Date September 2018
By the numbers
- Smaller tonnage late model machines are seeing steady demand while 1990s and older machines continue to fall
- Market demand for used late model 400- to 600-ton injection molding machinery will be stable with the potential for a dip in demand as a result of the fluctuation in automotive sales
- The largest capacity machines will continue to struggle to maintain consistent demand and sale price levels as these machines serve a much smaller segment of the market when compared to smaller capacity machines
Limited growth: Recent reports have highlighted that after record years in 2015 and 2016, manufacturers reported a decrease of 1.8 percent in new vehicle sales for FY 2017, with the number of vehicles assembled falling from 12.2 to 11.2 million. Continuing the trend, the forecast for the balance of 2018 is projecting a decline of 4.0 percent in the number of vehicles assembled. However, on a positive note, the negative trend in new auto sales could lead to an increase in demand for aftermarket parts as consumers utilize their older vehicles for longer periods of time. Given the shift, Tier 1 and Tier 2 automotive suppliers should see less demand from car makers, but could see increased demand for aftermarket parts. These two forces will be somewhat at odds, but given the fact that the auto market is still historically strong, any decrease in demand and value for the machines should be limited and consistent with historical value depreciation.
Demand trends: Smaller tonnage late model machines are seeing steady demand while 1990s and older machines continue to fall. For 2018, forecasts indicate increasing demand for some specific packaging, such as bottled water and generally for pharmaceuticals, while food-related demand will be level. This should continue to support stable demand for later model injection molding machines in this class.
Market demand for used late model 400- to 600-ton injection molding machinery will be stable with the potential for a dip in demand as a result of the fluctuation in automotive sales. The most recent auction data has shown demand for this category of molding machines to be less stable than normal with regard to mid-2000s machines and stable for newer vintage machines. Given the projections for automotive production going forward, the value trends should stabilize at slightly lower levels than in past years as end users adjust to current and forecasted production levels. The largest capacity machines will continue to struggle to maintain consistent demand and sale price levels as these machines serve a much smaller segment of the market when compared to smaller capacity machines.
Given the changing landscape for injection molding machinery across a broad range of sizes and types, it is always important for lenders to partner with an appraiser that has up-to-date information on value trends. Gordon Brothers’ proprietary database contains millions of auction records, and appraisers monitor current sales performance and value trends on a day-to-day basis. This detailed information translates to additional security in knowing that appraised values reflect real-world results.
Industry benchmark: North American shipments of new plastics machinery rose in the first quarter of 2018 by 15 percent when compared to the same time last year according to figures released July 10 by the Plastics Industry Association’s Committee on Equipment Statistics. Year-over-year injection molding machine shipments were up 23 percent. However, Q1 2018 was short of the Q4 2017 numbers by 11 percent. It should be noted that historically Q1 is slower than the rest of the year due to seasonality so we could see increases as the year goes on. Healthy corporate profits partially driven by the 2017 tax cuts have helped investment and should continue to buoy stabilized market conditions.
Technology improvements driving upgrades: With strong production demand during the past three years, the need to upgrade and refurbish older machines has become increasingly important as companies try to maximize capacity. In the United States the average age of an injection press is approximately 15 years. These older assets, when not refurbished or upgraded, decrease in value at an accelerated rate as they become comparatively less marketable. Newer all-electric molding machines are increasingly desirable because of their lower operating costs. The movement towards greater automation has also spurred sales for associated robotics.
Industry landscape: Injection molding machinery presents a highly competitive landscape for all the players operating within the market and is dominated by international players as the market space is highly capital-intensive in nature. The vendors in this market are also experiencing demand from the medical and orthodontics industry, which is expected to drive the demand for injection molding at least until 2020.
Lower resin costs freeing capital for investment: Machinery values have also been impacted, albeit to a lesser extent, by falling resin prices. Declines in oil, coal, and natural gas prices have contributed to improving margins for injection molders by reducing both the cost of raw materials and transportation of finished goods. This has freed up capital, enabling increased investment in production machinery
Brand impacts value: Brand recognition remains an important factor in determining the value of injection molding machines. Top manufacturers include Husky, Engel, Milacron, Krauss-Maffei, Nissei, Toshiba, and Sumitomo (SHI) Demag, each of which is known for its high-end quality and strong brand recognition. Brand recognition does improve expected liquidation recoveries as buyers trend towards machines they are familiar with.
Forecast stable: Secured lenders should continue to monitor the trajectory of the automotive industry while also watching the impact of resin prices on the profitability of plastic product manufacturers. Industry experts say automotive suppliers will continue to invest in multi-component technology and move to reduce weight, which means the automotive market will continue to be a market driver in the coming year. While current conditions and projections for these underlying elements look to remain at historically stable levels, growing uncertainty as a result of the current and potential increased tariffs by and against the United States as well as the current ongoing re-negotiation of NAFTA is affecting domestic and international markets. Time will tell if these factors will prove to have a negative trickle-down effect on the demand for plastics-related products and their associated production machinery.